Most employers still offer traditional core benefits, but over the past six years, the percentage that offer benefits through another mechanism – via a flexible benefits scheme, on a voluntary basis or through a salary sacrifice arrangement – has risen steadily. In 2004, for example, 37% of respondents offered a core benefits package, 60% provided voluntary benefits, 69% said they offered perks through a salary sacrifice arrangement and just 15% operated a flexible benefits plan.
This diversification in the way employers offer benefits may be due, in part, to the rise of total reward strategies, where they offer several types of benefits arrangements as a cohesive plan.
Providing benefits outside of a core arrangement also enables employers to offer staff greater choice and flexibility. This factor may be behind one of the biggest changes over the past 12 months – the increase in the percentage of employers offering perks on a voluntary basis or via salary sacrifice.
In 2009, 64% of respondents offered benefits on a voluntary basis to all staff. This has now risen to 69%. Employers may have looked to voluntary schemes to offer extra perks during the recession at little cost.
The last 12 months have also seen a change in the way employers offer perks via salary sacrifice. Some 78% now offer benefits to all staff in this way, up from 71% in 2009. The percentage that offer such perks to only some staff has fallen slightly year on year.
This change may be due to clarifications on how some tax-efficient perks – namely cycle-to-work schemes – must be implemented to qualify for tax and national insurance efficiencies. The perk must be offered to all employees in order to qualify.
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TYPES OF BENEFITS PACKAGE ON OFFER
The complexity and evolution of benefits packages has led to myriad definitions.
Our research is based on the following:
CORE PACKAGE The traditional package of employer-paid perks, where employees cannot opt out of, or switch between, benefits.
FLEXIBLE BENEFITS A package of employer paid benefits that allows employees to switch between two or more benefits, or between employee-paid perks and cash.
VOLUNTARY BENEFITS Products and services on which an employer has negotiated a discount with suppliers, but here the employee pays for the benefits out of their net salary.
SALARY SACRIFICE The mechanism through which employees can opt to pay for tax efficient benefits by sacrificing some of their gross salary for their employer to buy the benefits on their behalf.
Read more articles from the Employee Benefits/Alexander Forbes Benefits Research 2010